While perusing yet another lengthy and contentious comments section of a signature "Geithner Wars" diary, I found a nugget of agreement between a pair of tired Internet warriors who seemed to have rallied around the point to negotiate a temporary cease fire.
As you can see here, the Geithner Wars are raging on as we speak. A deeper look, however, finds a point of agreement between an Obamabot and an Obama "Hater". At one point, the Obamabot stated that "people are just saying things about Krugman because honestly people do quote him like he is god". In response, The Hater then states "people quote him like an intelligent person", conceding that Paul Krugman is not God.
This eliminates one of the major points of contention of the days old war, since we can now be certain that Krugman will not be challenging Obama's claim on the Universe.
Since we've established that Paul Krugman is not God, we can now publish criticism of his criticism of the "Geithner Plan", formerly known as the "Paulson Plan".
On March 22nd, 2009, Paul Krugman wrote the literary equivalent of a bitch slap across Brad DeLong's cheek. With the exception of introducing DeLong into his sphere of hate, it was fairly representative of the type of heretical slander Mr. Krugman has been dealing these days. In between the "We Love You Krug" comments and the "Geithner is Satan" comments, a few comments critical of Krugman's analysis were available. Since I don't understand finance well enough to weigh in, I'll let these folks pick him apart:
In response to Krugman's assertion that the biggest problem with Paulson's Getihner's Plan are the non-recoursive loans
What’s the difference between the government making non-recourse loans to these investors and depositors making non-recourse loans, guaranteed by the government, to banks? I’ve never heard Professor Krugman complain about deposit insurance, yet it represents a much bigger, and potentially much more distortionary, subsidy than the Geithner plan ever could be. If deposit insurance is okay, then why are these loans so awful? — F. Blair
In response to Krugman's estimate that toxic assets - of which nobody, according to Kreugman, knows the real value of - will turn out to be worth 15% less than the purchase price
If the first part of this is true, then why would it be highly likely that it will turn out to be worth 15% less? Isn’t it equally likely worth 15% more? — sgwhiteinfla
Finally, a comment, in it's entirety, that debunks the entire premise of Krugman's post, which is that DeLong fails to address non-recoursive loans in his defense of Geithner's plan:
Doesn’t DeLong address that in this exchange?
Q: Why then should hedge and pension fund managers agree to run this?
A: Because they stand to make a fortune when markets recover or when the acquired toxic assets are held to maturity: they make the full equity returns on their $30 billion invested–which is leveraged up to $1 trillion with government money.
Q: Why isn’t this just a massive giveaway to yet another set of financiers?
A: The private managers put in $30 billion, but the Treasury puts in $150 billion–and so has 5/6 of the equity. When the private managers make $1, the Treasury makes $5. If we were investing in a normal hedge fund, we would have to pay the managers 2% of the capital and 20% of the profits every year; the Treasury is only paying 0% of the capital value and 17% of the profits every year.
Q: Why do we think that the government will get value from its hiring these hedge and pension fund managers to operate this program?
A: They do get 17% of the equity return. 17% of the return on equity on a $1 trillion portfolio that is leveraged 5-1 is incentive. — noobama
This last guy seems real confused. Doesn't "noobama" know that pointing out major discrepancies in Krugman's logic actually helps the very man (being) his name claims to oppose. Maybe he simply misspelled "goobama".
I hope this satisfies people on both sides. Those that wanted nothing more than to see Krugman taken down a notch got their wish, and those who wanted to see someone rebut Krugman's comments with something more substantial than "Paul Krugman last had sex at the original Studio 54 grand opening and therefore hates Obama" got to see the discussion taken to a marginally higher level.
As for me, I'd just like it if everyone took a break from the mudslinging and wrote a letter to their congress folk, newspapers, friends and/or family telling them, calmly, that many, if not a majority, of the most intelligent economic minds in our country believe nationalization of our banking system is the most credible solution to our economic crisis.